AIA and PTAB Unconstitutional Under the Public Rights Doctrine

By Neal Solomon
October 26, 2017

EDITORIAL NOTE: This article is the final installment of an 8-part series exploring the constitutionality of the PTAB under the public rights doctrine. To begin reading from the beginning please see: Patent Review in an Article I Tribunal is Unconstitutional.

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While the notion of emulating federal district court adversarial proceedings in an executive agency to determine patent validity has an analogy with other administrative agencies that deal with labor rights, health, environment, public safety and so forth, adjudicating patent rights in Article I tribunals lack a critical feature. Patent rights derive directly from the Constitution. Rights that are given by statute that deal with public health and safety may require an agency to review disputes. However, patent rights are critical private rights upon which the economy depends for its long-term progress. This special type of constitutionally embedded private right, the limited exclusive nature of which originates in the Constitution itself, may be adjudicated only in Article III courts.

The congressional experiment with removing review of patent validity to an Article I tribunal has had the adverse effect of destabilizing the patent right. These effects have harmed the incentives to invest in technology and the declines in technology investment have caused dramatic declines in productivity growth and aggregate economic growth. While the small technology companies have been harmed by the institution of the IPR regime, large technology companies have benefited by protecting remarkable monopoly profits.

Nevertheless, patent holders’ rights have been breached by the interference of the legislature and the executive branches on a private property right. The effect of IPRs can be seen as a form of taking of private property by the federal government. The beneficiaries of the takings are large technology corporations that get a free ride from low standards of patent validity tribunals and the losers are inventors and investors who lost the bargain of patent disclosure in exchange for limited exclusive rights.

Patents as Private Rights Have Historically Been Adjudicated in Article III Courts, Far from the Political Branches

Originally conceived to constrain a few overly broad patents that may have been improvidently granted, IPRs now routinely attack all enforced patents. The attack on the patent system derives from a false narrative of weak patent quality promulgated by the big tech cartel to propagate their monopoly profits and to constrain entry barriers for competitors.

Once Congress was persuaded by the massive lobbying power of the big tech lobby to perpetuate their commercial interests, the executive branch was employed to administer mechanisms to attack patent rights on behalf of the big tech infringers. The adversarial structure of IPRs appears to have integrated a new government mechanism to support big company infringers against small entities. Since the big tech corporation lobbyists wrote the AIA, this observation should come as no surprise. The AIA and PTAB procedures reveal the application of arbitrary government policies and procedures to benefit big companies with a bias against patent holders. In retrospect, it would appear that we have witnessed a hostile takeover of the economy by a tech cartel with a concerted campaign to defeat competition. Given unusually high cancellation rates, IPRs, and their threat, perversely emboldens infringers to infringe, an outcome that Congress did not contemplate. PTAB has an imprimatur of legitimacy, but, in reality, IPRs supply a mechanism for harassment under the mask of abuse of executive agency power. PTAB epitomizes the abuse of discretion in its applications of unfair procedures.

It is apparent that the IPR mechanism, administered by a biased or ideologically-driven executive agency, facilitated the largest shift of wealth from small entities and investors to a technology cartel in history. As a consequence, the effect on the U.S. economy in the last few years since the AIA was passed is among the worst performing in history, with a near zero productivity growth rate and very poor aggregate economic growth.

Congress is often susceptible to influence of commercial interests and the AIA illustrates the effects of these biases. However, the application of these political forces to the bedrock of the economy, viz., the patent system, undermines fundamental rights to inventors derived directly from the Constitution.

Article III Court Review of Patent Validity Ensures Stability of the Patent System

The Constitution has mechanisms to correct these mistakes. First, the separation of powers enables adjudication of patent validity in Article III courts, the long-time home of such disputes. Due process mechanisms seek to correct abuses of executive power. Far from being alien to the determination of separation of powers, the public rights doctrine lies at its heart, carving out careful exceptions to the rule of the proper forum for the adjudication of disputes. However, all interpretations of the public rights doctrine clearly show that without consent, due process or Article III court review, Article I tribunal adjudication is unconstitutional. As an example, the application of procedures by PTAB in IPRs clearly lacks the minimum due process standards.

Only Article III courts can provide a fair, neutral and unbiased forum for assessment of patent validity. For over two hundred years, patent validity, patent infringement and patent damages have been consolidated to be heard in federal district courts. Federal courts supply impartial judges that are immune from influence by the executive or legislative branches. Furthermore, federal courts supply jury trials that enable a fair application of due process rights in the hearing of a patent dispute. Patent validity review is only a single component of patent infringement cases and it is efficient to have this component of the matter reviewed in a single matter.

Even if the PTAB were to only institute IPRs after application of a very stringent bar by respecting the presumption of validity with a clear and convincing evidence standard, as advocated in Microsoft v. i4i, and only then applied the federal district court standards of procedures in the administration of IPRs, the PTO tribunals would still be susceptible to the political abuses that we have witnessed since PTAB’s inception that would tend to deprive patent holders of fundamental due process rights.

IPRs cannot be repaired. The PTO, as with any executive agency, is susceptible to political and commercial influence. Its appointments have a tendency to ideological abuse and bias. We have seen many instances of abuses of all of the elements of due process in PTAB. The IPR experiment has clearly failed. If PTAB seeks to emulate federal court adjudication, but with a glaring omission of due process components, then why not dissolve PTAB and restore all patent validity reviews to the Article III courts? This simple solution has the advantage of maintaining historical consistency. The separation of powers demands that all patent validity reviews be restored to the federal district courts.

Conclusion

This series has looked beyond the abnormally high numbers of PTAB invalidity results to explain the causes of these phenomena. The core problem with the PTAB is that IPR proceedings lack the fundamentals of due process. Consequently, according to the public rights doctrine, the PTAB’s application of IPR proceedings is unconstitutional.

Other series articles:

The Author

Neal Solomon

Neal Solomon is CEO of Advanced System Technologies Inc. A prolific inventor of technologies involving semiconductors, communications, data management, imaging, robotics and healthcare, he holds degrees from Reed College and the University of Chicago.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 24 Comments comments. Join the discussion.

  1. Dan Hanson October 26, 2017 4:34 pm

    Thanks for writing this series.

  2. B October 26, 2017 5:08 pm

    This is a great article, and (as stated) IPRs cannot be repaired. APJs are susceptible to idiotic biases, and are rarely competent to adjudicate the time of day, much less an intricate patent issue.

  3. Eric Berend October 27, 2017 5:42 am

    The “benefits” of the technorati’s scorched earth campaign against inventors and patent holders has lasting effects beyond what has already been seen.

    If there can be so much good will and good faith belief in the U.S. patent process baseed upon the relatively long odds against success under the regime previous to the past 20 years; then, how long will it be before inventors and capital formerly supporting small business innovators relying upon classical IP protection of U.S. patents recover a substantial portion of the same?

    Trust has been broken. The traditional U.S. patent bargain is severely sullied. Just as it is not the role nor station of inventors to establish and practice patent law; it will not be their core expertise called upon to understand the applications, implications and ramifications of future putative changes to U.S. jurisprudence, in this area of the law. They cannot all be counted upon to have the comprehension of the issues and details so much as a ‘Tesia’, an ‘angry dude’, a ‘Bemused’ or a ‘Pro Se’, as seen in this forum.

    And, that is to presume their good will returns as readily as pouring water back into a pitcher.

    However, good will is not dependent upon intellectual or logical factors alone. Amid a plethora of doubt justifiably raised by the damage deliberately wrought to U.S. patents in particular and as amply described in this and similarly situated fora; and with outrage and anger profoundly aroused and indelibly imprinted upon the emotional perceptions of this massive exploit against them; it is folly to presume that restoring the U.S. patent system to even the rough bargain that was sustained pre-AIA and before the past two decades, will somehow magically restore inventors’ and small entity capital sources’ faith in its actual operations, workings and outcomes.

  4. Eric Berend October 27, 2017 5:51 am

    I would be remiss if I did not thank Mr. Solomon for producing this profoundly conceived, extensively detailed treatise of the topic. A robust work that will stand the test of time.

    Thank you, Mr. Solomon, for writing such a tremendous, principled exposition.

  5. Chris Gallagher October 27, 2017 7:08 am

    Neal
    No surprise my friend, but with this entire series you have outdone even yourself !

  6. David Michaels October 27, 2017 8:32 am

    Small entity inventors can rarely afford litigation in the Federal district courts. And federal judges in the district courts spend so little time on patent and trademark matters that they rarely develop a full understanding of what is a novel invention or how to construe claims. So self represented inventors have no chance of success in a clogged federal court system.

    Maybe the USPTO needs Article III Judges who specialize in IP matters. Even the Federal Circuit judges are overruled by the Supreme Court more often than most people would like.

    The Chief judge can be the source of justice problems, if they worry too much about statistics and length of time cases are pending. Too often, the addage haste makes waste applies. Snap decisions based on congnitive biases to quickly decide cases makes judges overlook important facts or the applicable law.

  7. RespectPatents October 27, 2017 9:17 am

    Neal,

    This is a project to be very proud of completing. Thank you for doing it. While eliminating the PTAB (maybe even interferences and re-exam in the process) is a magic bullet, SCOTUS stripping power in Oil States will be a huge step forward.

  8. Paul F. Morgan October 27, 2017 10:33 am

    If you expect to have the Sup. Ct. or Congress take a due process argument against IPRs seriously, i.e., if you want to eliminate IPRs, it will not be done by blog articles without ANY SPECIFIC legal and factual arguments as to why IPRs are inherently lacking due process. [As opposed to the different constitutional grounds being properly raised with such specific arguments in the pending Oil States Sup. Ct. case, not that the Sup. Ct. has to ignore other well-amicus-supported arguments.] This article is just another nonconstructive feel-good for the audience of IPR-haters, especially those who have personally financially suffered from IPRs.

  9. Edward Heller October 27, 2017 10:40 am

    “False narrative.”

    One would think that if Congress was told repeatedly that the PTO was systematically issuing large numbers of invalid patents that Congress would be concerned as to why that was the case just as much as it addressed the asserted problem by providing a postgrant revocation procedure that strips patent owners of the presumption of validity. But has Congress done anything whatsoever to investigate the “alleged” problem with the PTO?

    No.

    This tells anyone with a brain that either Congress knows that there is no such problem in the first place, or that this is a problem inherent in the ex parte examination of patents.

    But at least one would think that Congress would create a commission to review whether there is a problem that it can address. But it has taken no sense steps that I know of.

    One of the more interesting things that came out of the Oil States briefing was the brief by the patent historians which described how the British system worked back before United States was established. One of the procedures the British had was effectively a pre-grant opposition that was tried to a jury. If a patent was about to issue that adversely affected existing commerce, anyone that would be adversely affected by the grant could file a caveat with the appropriate parties considering the issuance of the patent. There would be an investigation to determine whether the patent was novel.

    Oddly, United States had just such a system in place prior to the 1999 amendments that gave us patent application publication. The procedure was known as a public use proceeding. But it was rarely used because the public did not know about the pending application.

    It seems to me that we might consider reinstituting something like this for the future so that third parties might file protests prior to a patent’s issuance if they can demonstrate that they would be adversely affected. I should also think that the protester be required to pay cost of defense of the patent applicant, otherwise the whole patent system would devolve into the big companies protesting the patents of anybody trying to get a patent in their field who had not granted them a cross license.

  10. Anon October 27, 2017 12:01 pm

    Mr. Morgan continues his cheerleading efforts of his very own “feel-good” nonsense.

    If you thought as you wrote, you wouldn’t bother so very hard trying to change the narrative, now would you Mr. Morgan?

    THAT you squawk so incessantly that “blog” articles are meaningless – on blogs – tells me that you feel exactly the opposite and that you fear that the groundswell created by those actively engaging on blogs IS starting to impact the larger narrative.

    I find it interesting as well that your “just shut up” type of mantra really does NOT distinguish blog writing that is more emotionally based from that which is more legally based.

    Being legally based does not require a level that would be reflected in submitted briefs to the courts.

    THAT is a separate mechanism all on its own.

    Blogging with legal reasoning – that which you personally abstain from – is a different – and equally valid – mechanism, no matter how many times you want to whine that such “won’t change anything” (even as you yourself use the mechanism – on an emotive level – to effect change).

    Given the more polite nature of this forum, I still find you and your posts not only boring, but misinformative and quite misleading, and yet quite ineffective for what I see your aim to be. Given the last position, I heartily encourage you to continue your rather poor efforts to affect the narrative by continuing to emote that blog writing is meaningless and changes nothing. Your protests ring the opposite, so please, continue those protests.

  11. Anon October 27, 2017 12:11 pm

    Mr. Heller @ 8,

    Well back in time, while the groundswell of what would become the AIA was being heard, my voice was out there admonishing the public at large and my representatives in particular (and directly in private) that the FOCUS of any improvements to the patent system needed to come through improvements in the INITIAL quality of examination.

    The Office does not – and cannot – control the quality of submissions per se (and in truth, such is by and large wasted effort),

    The Offices tries – and should not – control “quality” AFTER the horse has already left the barn with Constitutionally questionable post grant mechanisms.

    Coming into law out of manufacturing (and the real world where the likes of Deming were applied quite successfully), the Office attempts with post grant mechanisms are simply amplifying the wrong focus. One simply does not improve a manufacturing process by installing a more robust warranty and after market replacement program. ANY such real world programs – if successful at all – are successful because of additional feedback mechanisms that directly affect the INITIAL processes.

    The “brains” that have brought us the AIA – and champion (or cheerlead) the continued presence of such as the IPR regime – simply are out of touch with the reality of what effective change will require.

    There are – of course – ulterior motives behind the IPR scheme. And NOT fixing the front process appears to be a part of those motives. As you notice, there is something VERY wrong with the type of thinking that pervades the system now, the type of thinking that brought us the AIA, and the type of thinking that seeks to defend the IPR no matter how defective that regime is in application or even in concept.

  12. Paul F. Morgan October 27, 2017 2:01 pm

    What anon and some others constantly seek is the equivalent of of a >$20,000. IPR petitioner prior art search in all 600,000 applications a year, for “free.” That is, with the taxpayers paying for it, rather than any of his clients. Run that multiplied cost figure on your calculator. It ain’t ever going to happen.

  13. Edward Heller October 27, 2017 4:30 pm

    Paul@12, you might be right. But I question why Congress has never even formed a special, non self-interested, commission to review the problem identified by so many testifiers. It is almost as if there was a “wink” “wink” going on between the testifiers and the congressmen.

  14. Anon October 27, 2017 5:24 pm

    What I seek Mr. Morgan is the job of examination done correctly the first time.

    That’s really not asking that much, is it?

    Beyond that – and perhaps more pertinent to our exchanges, I DO ask for some critical thinking, a bit of a spine, and a willingness to actually engage on the merits, rather than snipe from the sidelines and refuse to actually engage on the merits.

    Let me know when you are willing to have “that happen.”

  15. Eric Berend October 27, 2017 5:28 pm

    @ 12. ‘Paul F. morgan’:

    If you were such a “realist” as you portray, you would have a word for the millions diverted from U.S. patent examination and maintenance fees, paid by inventors explicitly for said reason; to other purposes. But you don’t. You never do. You merely snipe derogatory comments that add little or nothing to the ongoing discussions here.

    However, as another concerned commentator above has written: why are you so motivated to act darkly, thus? Why should a “mere” blog comment board bother you so much?

  16. The Time Is Now To Act October 27, 2017 6:37 pm

    Eric @15- astute and timely comment re fees.

    The funds are already there and Congress has no ears for applying LEAN to ex parte examination. Toyota sends its execs worldwide as ambassadors of process improvement. A partnership w the PTO would be wonderful.

  17. angry dude October 27, 2017 9:38 pm

    Morgan @12
    Dude
    I will gladly pay 20k just for examination and scour the Earth for prior art myself and submit whatever I find in IDS
    But when my patent is granted I want no f@$%^&& IPRs
    GOT IT ?

  18. The Time Is Now To Act October 27, 2017 11:08 pm

    “as against the world”

    Indeed

  19. CP in DC October 28, 2017 3:19 pm

    I’m with Paul F. Morgan on his views of IPR at the Supreme Court.

    I’ve read several briefs, amicus and all on Oil States and I’m not convinced that this is such a clear cut case that IPRs are unconstitutional, as often argued on this blog that IPRs are unconstitutional.

    The brief by AIPLA sets forth why the expertise of the PTO is critical in determining the validity of patents. After all, patents are a government granted right. I was surprised to notice that the author was Meredith Martin Addy, after she wrote the article critical about patent ownership so many found interesting, but later claimed it was meant in tongue and cheek.

    The AIPLA brief has the same logic found in Cascades Projection majority denial for en banc hearing.

    I know the constitutionality of IPRs is not a popular view on this blog, but the arguments in favor of constitutionality are good. I agree, the implementation of the IPR statutes by the PTO is a joke (Aqua, among others, signals this view). Read the SAS Institute brief by the PTO for more disgust.

    Of course, come November 27 we may have a better idea. Until then, well researched and drafted arguments will carry the day.

  20. Eric Berend October 28, 2017 4:12 pm

    @ 19., ‘CP in DC’:

    The topic is not closed with your blithe and incorrect assertion that patents are a “…government granted right”. If the so-called “right” granted, is subject to endless attacks, it is no “right” at all, but merely a license – and, a risky and unreliable one, at that.

    Try to retain relevance, here. From an inventor’s point of view, an invention is a newly created, private property in the world. There is no benefit to devoting the time, mental capacity, energy and resources necessary to genuine innovation, if the proceeds are sure to be stolen away for the sole enrichment of others.

    If you cannot or refuse to recognize this essential truth; then, none of the observations you express in comments written in this forum, will be free of this slanted view. You always write comments here, as if the incentivization of innovation is to be taken for granted, regardless of the balance of risk and reward involved, for the essential stakeholders.

    As it is sometimes apparent that you refuse to be honest about your particular anti-patent agenda obviously not congruent with the interests of inventors and other small entity patent holders; then: why are you here? Principled advocacy, even of an opponent, is to be respected. That does not mean your obfuscations and distortions here should be regarded as bearing a similar merit.

  21. Edward Heller October 28, 2017 4:41 pm

    CP, if the PTO is not doing a sufficiently good job before it issues a patent, should we not have investigated methods and means as to improve pre-grant examination before we even considered authorizing postgrant reexamination?

    Regarding the need for technical expertise, courts often call on its own experts to advise it on technology and to provide recommendations. The courts that do this have resources that allow it to make decisions that are both technically and legally competent. There is no need to bring in the PTO to provide technical competence to courts.

    The problem with postgrant reexamination is that patent owners need reliable property rights in order to make investments, including raising capital and investing in production. Venture capital is not entirely turned on by postgrant revocation. The whole system of postgrant reexamination is undermining the American patent system.

  22. CP in DC October 28, 2017 5:28 pm

    Edward Heller @ 21

    I agree examination needs drastic improvement and have advocated extensively on this matter. Examination at the PTO is inferior to European examination, Korean, Japanese, and China is closing in fast. The “patent quality” initiatives are a joke and practitioners know this.

    When I advocated that better examination would diminish IPR institution, I was told on this forum that I was blaming the victim (the inventors who pay lawyers to prosecute the work).

    Judge Michel also advocated before Congress to improve the director’s ability to fire bad examiners and also reward good ones. The PTO needs to make a herculean effort to improve examination, but it won’t. It won’t because that would take real work, starting with removing the count system that only encourages production regardless of the quality of the work product.

    The outcomes we see at IPR are, in part, the result of poor examination. It is also the result of a slanted process that needs repair, extensive repair.

    The AIPLA amicus brief addresses the issue of technical expertise. It speaks not only of patent expertise, but bankruptcy expertise and how Congress created those courts. Other agencies with expertise, like trade (ITC) have their courts.

    The day the IPR institution rate is in the single digits (or just low), inventors, investors, and the public can rely on the patent they have, because challengers will know that no matter how hard they try, they are unlikely to get a chance to invalidate the claims.

    I am not foolish and recognize that we have a long way before we get there. And I know that the road will require reform in examination and IPR procedure.

  23. angry dude October 28, 2017 6:54 pm

    CP in DC@22

    blah blah blah
    the real positive change can only happen when dishonest hypocritical dudes like you are expelled from all branches of the system
    extinguished
    not gonna happen any time soon

  24. Night Writer October 28, 2017 7:44 pm

    @CP in DC 22:

    The IPR system is fundamentally flawed. There are not fixes that will make it OK.

    Plus, you should like some kind of K Street Google paid person to me. EP examination isn’t really much better than US examination. I can get about the same claims allowed in both jurisdictions and have many times. Both are flawed.

    The US system needs to go back to TSM and improve search.

    It used to be when I did prosecution that the examiner was held to a high standard to find rejections and we argued over TSM and what the art disclosed. Now with Alice and TSM gone, the whole thing is a joke. The examiners hold all the power and allow things to keep the machine going. Total joke.

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